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Franchise Business Tips, Advice and Recent Articles

 

 

Understanding Sales Psychology  (From Andrew Phillips – Brian Tracy (ANZ))

 

Understanding the psychology of sales is crucial to any business wanting to remain competitive in the 21st century. For a salesperson, superior selling skills are the difference between earning a good income and struggling to pay the bills each month. The sales force of any organisation is its backbone. A company may have the best product or service in the world, but if they don’t know how to sell their offering, the majority will never know about it or get to experience it.

Despite the crucial role that sales plays in the success of a business, most salespeople are trained ‘on the job’ and do not receive any formal or ongoing training in their field. They believe they are trying hard to sell their company’s product and when they don’t achieve a sale, they chalk it up to ‘bad luck’. These salespeople do not understand sales techniques or the psychology of selling. In fact, the majority of salespeople are in this group. It is a well-known statistic that in professions where sales is the key to revenue, 5% of the salespeople earn 95% of the money. How do they do this?

Brian Tracy, a world leader in the psychology of achievement and sales strategy, says that to become a top salesperson, you must do your work: study your craft, analyse your industry, gather knowledge, position yourself, look at your market, prepare yourself, prospect and make appointments. Professional salespeople know that they are actually problem-solvers. They employ an important technique called gap analysis.

BECOME A PROBLEM SOLVER

Understanding gap analysis and applying its principles are the keys to sales success. A sale is only possible when a problem exists. In this sense, customers buy solutions, not products. A salesperson helps identify the customer’s problem and then offers the solution. With their product or service, the salesperson is able to bridge the gap between the customer’s current situation and the desired outcome. These gaps between the actual and the ideal are opportunities to increase productivity or decrease cost.

According to Mark Garbelotto of the Australian Sales Academy in Melbourne, gap analysis is a highly effective technique that puts the salesperson in the role of ‘problem seeker’ and ‘problem solver’. If you can identify the problems that a prospect is experiencing, they will realise their need for a solution (i.e. your product). In addition, listening to the prospect will build trust, show that you care and ultimately, you will build a healthy relationship with your new customer.

Garbelotto used gap analysis extensively with an Australia-wide importing company over a 2.5 hour, problem-focused interview which was aimed at uncovering the challenges that their sales professionals were experiencing. He developed and utilised a questionnaire that clearly highlighted the gaps between their ideal and actual results. Following this, Garbelotto presented a profitable and cost-effective solution that would not only solve their problems, but meet their desire to increase profits.

PREPARE YOUR QUESTIONS

Gap analysis is the art of asking questions in a general-to-specific order as a means of uncovering the wants and needs of a prospect. According to Tracy, a salesperson should not talk about the features and benefits of their product without first understanding the gap that their product can narrow for the customer.

Pascal Martin of Pascal Martin Consulting in Brisbane, agrees that gap questions are vital for controlling the conversation of the sales process, raising buying desire and, importantly, for positioning the salesperson as a professional. Martin cites as an example, a major plumbing supply company in Queensland that he trained using Brian Tracy’s Advanced Selling Skills seminar program.

As a result of the sales training, the plumbing supply company developed their own set of gap questions which allowed them to position themselves as the preferred supplier to new clients. They were also able to generate higher sales from existing clients by discovering previously unfulfilled needs, even in a price-driven market.

In addition, the formal training gave their junior reps the confidence to be aggressive in winning new accounts, which is something they had previously never done. Martin confirms that in terms of sales psychology, the skilful questioning process of gap analysis brings clients’ emotional needs and wants to the surface, and thereby fuels and facilitates the sales processes.

CUSTOMERS BUY SOLUTIONS

The role of the salesperson is to uncover the customer’s need. Product and industry knowledge help a salesperson identify the gaps that their products and services can fill for the client. What kind of gaps do your products help to resolve? What solutions do your products offer? How do you package your solution to appear cost-effective? You must build a list of questions and sequence them from general to specific, then paint a word picture of the value that the customer gets from using your product or service. Offer a third party reference from another customer you helped that was in a similar situation.

Clarity is critical.

Some real-life examples of these questions and responses (condensed below) come from Bram Lagrou of Xsell Partners International in Adelaide. In competing for a training contract with a major commercial cleaning services company, he focussed on three areas that ultimately won him the deal.

• What would be the desired outcomes of investing in your staff? A boost in staff motivation, effective delegation, better leadership in the workplace, improved self-management of staff and team management.

• How would you assess the return on investment? Key staff being empowered and being more positive, taking ownership of the job, and thereby freeing up management to focus on other tasks instead of constantly overseeing staff.

• Price aside, what would make you choose one provider over the other? Drive, eagerness in wanting to do business with us, positive personality, business flair and accountability.

In this instance, Lagrou earned the client’s business by asking the right questions, understanding the customer’s needs and having a positive, can-do attitude toward solving the challenges.

KNOW YOUR PRODUCT & INDUSTRY

Sales training specialist Mary Burton of Apprise Solutions in Melbourne, stresses that salespeople must keep aware of the changes in different market sectors. With internet shopping on the rise, for example, retailers need to recognise opportunities where sales are being missed. With shoppers going into stores, checking out products and then going home to buy them online, there is a huge gap between the actual and desired outcomes for retail owners.

Often, the owner is not aware that the salesperson is not even asking for the customer’s business.

In her training practice, Burton has successfully used audits, surveys and coalface observation as tools which can be utilised to compare desired performance versus actual performance. These methods, in addition to the questioning process, are excellent indicators of identifying the gaps that exist between the actual results in a workplace or individual performance and the ideal or preferred outcomes that businesses are seeking. Burton says that gap analysis can be an ongoing process for supporting clients and their staff and for developing positive and continual improvements.

BEST SALESPEOPLE USE GAP ANALYSIS

Customer dissatisfaction is what leads to sales. A salesperson’s job is to expose the source of the client’s problem and offer the solution. People want to buy solutions. In order to uncover the problem, an effective salesperson uses gap analysis to show how their product can narrow the gap between the actual and desired result for their customer.

The technique of gap analysis is an important element of a successful sales strategy. Top salespeople study their craft and you or your sales team can stay competitive in today’s market with Brian Tracy’s advanced selling programs. His strategies are straightforward, and proven to achieve immediate and long-lasting results. These popular, interactive seminar programs have had four million graduates.

Andrew Phillips is the CEO of Brian Tracy International in Australia. His organisation has over 20 Accredited Licensees and offices all around Australia. Mark Garbelotto, Pascal Martin, Bram Lagrou and Mary Burton are Brian Tracy Licensees.

 

Understanding the psychology of sales is crucial to any business wanting to remain competitive in the 21st century, writes Andrew Phillips.

Click here for more information about Brian Tracy Franchising

 

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Article Extract from Recent Newsletter 189 - September 2011

Put your franchise into 1st Place – position yourself against your competition: how do you stand out in a crowded Franchise market to get the best Franchisees to consider your Franchise system?

Competitive athletes know that checking out the competition is as important as eating right, training and assessing their own strengths and weaknesses. Franchisors who want to win have to get their head in the game as well. Determining your Sustainable Competitive Advantage (SCA) and comparing this to your competition reduces risk, decreases speculative investment spend, clarifies necessary resources and saves you valuable time. 

Perspective franchisees’ demand for quality systems and excellent support runs high and sometimes blurs the lines of competition. Consider a franchise network that has been operating for less than two years, does this mean that the systems, processes and support offered by the Franchisor is of less value than the franchise system that has a 10 year operating model? It’s all about perceived value, the value offering over your competition. Everyone is fighting to feed the discerning appetite for information buyers are looking at price, ease of operation and above all ROI. 

Please click here to read the full story

Click here for more information about Business Development Alliance

 

 

 

Full Article from Recent Newsletter 188 - August 2011

 

Taking Time out of the Business for a Holiday

Most of us in small business fail to do the things that are necessary to make it easier to get away for a break! As a result we either don’t get away or at best not for long enough!

So, what can be done?  There are many things in reality and none of them are very difficult and include having much needed information for people who can step into your business to help run it while you are away. This information includes:

• Job Descriptions for key personnel
• Task Manuals
• Clear reporting protocols
• Responsibility charts

All of these and more are evident in the typical franchise business model. Sure franchising is not for everyone and it is not meant to be, BUT many lessons can be taken from the example good franchising offers.

For a retail store, a detailed Operations & Policy Manual is the minium standard of documentation to make it easier for a Franchisee or business -owner to “take a break”.

These Manuals leave nothing to chance and are designed to replace the owner so that senior personnel can ‘stand in their shoes’ when necessary. A typical Operations Manual will run into several hundred pages covering at least the following areas:

• Philosophy for conducting business

• How to use the operations manual

• Organisation Chart

• Directory of outlets and key staff

• Complying State Business Regulations

• Administration

• Human Resources and Training

• Cost Control Procedures

• Cash Procedures

• Sales and Customer Service

• Pricing Policies

• Marketing and Promotion

• Occupational Health and Safety

• Security

• Product Information

• And more…     

There are many reasons as to why you may need a break or time away from the business. The critical factors in doing so are all concerned with keeping the ‘doors open’. In most franchise networks when the ‘owner’ is away profitability drops and by developing your people to step up and take the reins not only allows you to work on the business but also allows your people to grow.

Remember, that the business needs you to take a holiday just as much as you need to take a holiday from the business. Returning refreshed energised and a clear head can only benefit your decision making. Like most things if we fail to plan our vacation time it will never happen.

For more information on taking a holiday please contact:

Mark Fernandez

Director

Business Development Alliance

 Please click here to contact Mark Fernandez, Director of Business Development Alliance

 

Full Article from Newsletter 187 - August 2011

She Loves Me, She Loves Me Not ...

Franchising has often been referred to as a ‘marriage’ – a marriage between the Franchisor and the Franchisee. However, there is a new spin on the ‘marriage’ concept; married couples looking to become business partners in a franchise. Married couples across the country who constantly struggle to balance the responsibilities of working long hours, trying to spend time with each other and possibly caring for their children, too; are eager to find a solution.

 

More couples are turning to franchise ownership as a way to gain control of their work/home life - and still bring home the bacon. Franchising gives husband-and-wife teams the opportunity to capitalize on a turnkey business model, recognized branding, training and more, all the while allowing couples to be their own bosses.

 

Such opportunities provide greater flexibility than a traditional corporate job, freeing up more time to spend with the family - and each other. It's also a great way for former stay-at-home moms to re-enter the workforce in an industry about which they feel passionately.

Husband and wife franchisee teams working together can bring a sense of security. They are their most trusted advisors.

 

But don't be mistaken; similar to marriage, owning a business has its growing pains and challenges. Knowing when to work together is just as important as knowing when to stay out of each other's way!

Good clear honest communication, is the key as many little ‘misunderstandings’ have the potential to explode both at work and on the home front. Some key considerations are:

• Who gets paid the most and why?

• Can you fire your spouse if they are bad for the business?

• You have a vested interest in the spouse, first, before work.

• How hard is it to separate business and leisure?

• How do you tell your spouse they made a bad business decision?

• If you have an argument at work, do you bring it home?

• You have no chance to escape talking about the job or company, it follows you home. Is this ok?

• Even if you say it's work-related, it's always personal.

• If you divorce, how do you divide the company?

• What if one ends up doing all the work?

• Your personal issues, what happens when they carry over into the business.

• Who will make most of the big decisions and why?

• Who is the ‘numbers’ person in the organisation?

• How will the marketing be determined?

• Do we take holidays together – do we even get holidays?

Family friendly franchises provide a wonderful opportunity for business minded people who wear many hats. As a mother, a father, a wife, or a husband, finding a franchise with flexible work hours is a must. In order to have a successful franchise, it is imperative that you invest in a franchise system that can accommodate the responsibilities you have at home.

If you're considering going into franchising with your ‘other half’, ensure it's a business match made in heaven.

 

 Please click here to contact Mark Fernandez, Director of Business Development Alliance

for more on Family Friendly Franchising

 

 

Full Article from Newsletter 186 - July 2011

“Recruiting from within- Multi Unit Franchising”

The latest buzz word in recruitment is ‘Multi-Unit Franchising’ but what does it really mean? What are the benefits to the franchise system and what systems need to be in place?

 

Over the past year the concept of franchisees with more that one franchise has become very popular. With the current economic climate causing banks to maintain a tighter lending profile, recruitment for new franchisees has become very difficult. A number of systems have reported that by looking internally and expanding franchisees from one outlet to two and even three to four, has not only reduced the time taken to find franchisees, but have stated that by knowing the person already involved in the business has made it easier to manage overall and has reduced the risk. However, if you are looking to expand and become a multi-unit franchisee here are some questions that you should consider:

                                                               

• How hands on do I need to be in the operations?

• What people do I need to have in place to run multiple operations well?

• What expectations does the Franchisor have of multi-unit franchisees?

• What will be the impact on my current operations – financial, resources
•  Do I need to do any retraining with the Franchisor to ensure that I remain current with the franchise systems and procedures.

• What technology do I need to have to enable me to better manage the businesses

• What have I learned from other multi unit franchisees in the system?

The benefits can be rewarding over the long run and with expansion also bring excitement!!! Once you have decided to take on another store or location, your people become even more critical to your success. The old saying ‘you can’t be in two places at once’ becomes very real and you need to trust in your people even more and let go at times.

Multi Unit franchising is the way of the future as more and more franchise systems move away from tradition methods of recruitment. 

For more information on Multi Unit Franchising, please Click here to contact Mark Fernandez, Director of Business Development Alliance

 

Full Article from Newsletter 185 - June 2011

Robert Toth attended as a guest panel speaker at the BRW Franchising Conference 2011 at Dockside Sydney on the 30th of March 2011.  Robert was a panellist on the topic of “International expansion and master franchising” with the CEO of Oporto Jeff Fisher and Phil Blain of BDC.

The conference was well attended by new and existing franchisors and consultants in the industry.  This is a summary of the topics discussed by key presenters:

• International Franchising.

• Profitable partnerships with franchisees.

• The franchise sector – Trends in 2011.

International franchising – Robert Toth, Jeff Fisher & Phil Blain

When is the right time to expand internationally? 

 

The main driver for international expansion was systems growth where the system was established in the Australian market and generally had at least 36 units operating. 

Jeff Fisher (CEO of Oporto’s) indicated that Oporto had been expanding internationally and were looking at the China market however stressed the huge costs and difficulties entering into that market. 

It was considered that it could take 3 years of planning before a company was able to enter a foreign market and then 3 to 5 years before the company would see a return on their investment. 

The choice of jurisdiction was critical and there were considerable “unknown barriers” to expansion for example in India where their foreign controls restrict money being transferred out of the country.

Having the right network of consultants professional support and/or political connections in the country is critical for success. 

A company should plan to succeed but should also be able to absorb the enormous costs.

The cost of having additional head office staff to support international expansion and marketing fund issues requiring the franchisor to contribute capital to marketing to establish the brand as well as sending in house personnel was recommended to work with overseas consultants to control the process.

The cost and impact on the existing franchise operations needs to be taken into account.

 

Which model is still preferred – Master Franchising or area development?

Master Franchising was still seen as the most used model as opposed to area development agreements. In master franchising there is a split of the revenue stream whilst at the same time the master franchisor steps into the shoes of the head franchisor and contracts directly with franchisees.  The master franchisee takes on the obligations of the head franchisor in relation to recruitment, training and compliance by franchisees.

Area development agreements are essentially a contract to provide services and franchisees contract directly with the franchisor.  Therefore the franchisor receives the benefit of the revenue stream directly.  The area developer may be required to also establish its own franchise outlets and meet minimum performance targets.

 

Profitable partnerships with franchisees – Greg Nathan

Greg Nathan, Managing Director of the Franchise Relationships Institute offered the following advice to franchisors and their management teams:

 

• Ensure that your management team is up to date with their legal obligations under the Code and they understand their own franchise agreements.  This should be reviewed at regular intervals.

   

• Key issues a franchisor and/or its management team should consider when making decisions are:-

•      Is the decision or change in the commercial interests of the franchisee?

•      Is the decision or change in the commercial interest of the franchisor?

•      Is it right for the customers?

•      Is it right for the brand?

 

Franchisor “best practise” involves:

• Recruiting the right people.  Greg indicated 40% of the success of a franchise system was due to the franchisee with 60% due to the system, training and support of the franchisor.  

• Mentoring - providing new franchisees with an existing franchisee or business mentor is critical to ensuring their success.

• Training performance and development groups where franchisees with a facilitator critically analyse and openly bench mark their financial performance will drive franchisee success. 

 

Other key issues for franchisors were to ensure there was benchmarking of franchisee’s data and assisting franchisees to prepare their business plans.

A key complaint of franchisees is that the franchisor would not listen and therefore they felt a lack of respect.  Leadership involves listening, not being defensive, treating people with respect and not avoiding the issues.  If the answer is no, a franchisor should explain why. 

Greg indicated that the brand is the reputation and experience of customers not the logo which should not be forgotten by a franchisor.

 

The Franchise Sector in 2011 – Rod Young, DC Strategy

Rod Young, Executive Director of DC Strategy provided a snapshot of the sector in 2011 and gave his insight into our world of franchising. 

With the global financial crisis and the US slow down China has increased its market share of the global franchise market to 10%, India to 8.3%, Brazil to 7.5% and Russia to 3.8%.  These markets will continue to grow.

This represents a significant change to the economic centre of the world from the US to the Asian market and provides Australia an enormous opportunity for Australian systems and consultants to expand into these markets.

As a member of the International Franchise Lawyers Association, Wisewould Mahony is able to assist clients looking to expand internationally with a network of specialist franchise and licensing lawyers and consultants world wide.   

Many Asian countries are supporting the expansion of franchising as a business model such as Malaysia, Singapore and India. 

Australia

Rod made the following points:

• In Australia franchisor revenue growth was 12% in 2010.  Australia has a very high number of franchise systems per capita in proportion to many other countries.

• Franchising is a HR strategy and the value proposition in the end is the customers. 

• Franchisees look for a return on their investment.  Business is shifting and there are constant challenges to market share and new ways to market

• Multi unit franchises are expanding approximately 50% of Subway franchisees own more than one outlet. 

• A franchisor must be able to show their business model will give franchisees a return above a basic salary level. 

• The decline in franchise systems in Australia (7%) will clear out inefficient operators which will lead to further merger and acquisition activity in the franchise sector as distressed organisations are forced to merge or sell creating greater investment opportunity. 

Summary

My thoughts following the BRW conference from the quality presentations and views expressed were as follows:-

• Business is not complicated, it is people that make business complicated.

• Whether a franchisor or a franchisee if you follow the basic rules of business that is, buy well, sell at a profit, engage the right people and control your costs you are likely to succeed. 

• For franchisors the business model must provide a franchisee a return on their investment and deliver (apart from lifestyle promises) at the very least, more than a basic salary. 

• Franchisors need to stand up and provide greater support to their franchises in area of business management and support and assisting them to develop a business plan.   

• There will always be negative forces that may knock you off your plan.  The main issue is to have a business plan, get specialised advice from consultants and lawyers in the industry and surround yourself with quality people.

 

Click here to contact Robert Toth | Partner| Corporate & Commercial

 

Full Article from Newsletter 184

 

 

“It’s better to be looked over than overlooked”

What are the total costs of buying into a franchise?

Are there any hidden costs?  What’s in the fine print?  How much money do I really need to start a franchise business?

Most franchisors charge an Initial Fee to cover some of the costs for setting the franchisee in business. On-going fees are usually charged weekly or monthly, as a percentage of the franchisees Gross Turnover or Profit, and in some circumstances as a mark-up on goods supplied directly by the Franchisor. It is also becoming common to have the fee set as a fixed sum reviewed periodically. You must also take into consideration the following:

• What are the initial capital investment requirements?

• Are there any ongoing loans for equipment that you may need to consider in your cashflow budgets?

• Will you need funds (Working Capital) while training or until business begins to pay?

• Is there an initial contribution to the marketing fund that you are required to pay into before you commence trading?

• Is there an opening promotional payment that you are required to pay as part of your business launch? If so when do I have to pay this fee?

• How are the royalty, advertising contributions or other ongoing fees calculated and when are they payable?

• The costs of supplies – where do you get your materials, food, products from and what are the costs into store? Who pays for the freight?

• What are the leasing conditions for rent reviews and expectations of any upgrades to the shop fit out?

When considering to enter into a franchise it is critical that you do your homework and gather as much information as you can. The Franchisor will need to furnish you with a Disclosure Document that  outlines running costs of the business, however, if you don’t know what to look for and what questions to ask then you are leaving the door open for issues that may not arise in the short term, but they will arise. Buying a franchise business is so emotionally charged and is one of the biggest decision you will ever make….so take the time and do the numbers and have them checked by your accountant and your business advisor. 

For more information on buying into a franchise please Click here to contact Mark Fernandez, Director of Business Development Alliance

 

Full Article from Recent Newsletter 183

Why can’t I sue the Franchisor? – Exit Strategies

There are many successful Franchise systems that operate responsibly and support their Franchisees.  The Franchisors have invested in their business, staff training, research and development and look to ways to improve their system for the benefit of the brand, their consumers and their Franchisees.

However, for a variety of reasons, Franchisees may have entered into a Franchise system and become disillusioned.  They may have bought the wrong Franchise or:

• been “sold” on the hype;
• not objectively assessed whether there is a financial return on their investment;
• not be prepared to be held accountable;
• not have the adequate retail, marketing or management skills.

The fundamental issues prospective Franchisees should always consider before committing are.

• If there is no financial return for your effort (i.e. you can’t take out a salary) and there is no return on your investment – walk away.
• Once you have committed there is no “easy exit” out of the system.
•  There are no guarantees of any capital gain at the end so you better be able to make a return as you go on your effort (salary) and investment (profit).
• There is NO Franchise where returns are made without effort, dedication and commitment. 

 

If it’s too good to be true – guess what? It is!

HELP – GET ME OUT OF HERE! – EXIT OPTIONS

 

So what are the realistic options?

 

• Selling the Franchise

• Franchisor buy back

• Dispute resolution mediation - ACCC

• Walkout

• Why can’t I sue the Franchisor?

• Talk / communicate / negotiate

Selling the Franchise

Selling the Franchise to a third party approved by the Franchisor for the best possible price.  This generally can only occur where the business is operating profitably.

It’s a buyers market, no one will be generous.

No buyer will care how much it cost you to get into the business they will only offer what they consider to be the market value based on its current and recent trading history and performance.

 

The benefit: Franchisees will nevertheless (depending on where they are on the unhappiness cycle) sell to release themselves from ongoing costs to creditors and landlords, even if that involves “crystallising” a loss.

In some cases, this is a sensible option and one that enables the Franchisee to move on having had an experience not to be repeated. 

The key here is that the Franchisee will crystallise a loss but may be left with a manageable debt to deal with.

 

The Franchisor Buy Back – why would they?

This is difficult as most Franchisors are not in the business of buying back their Franchises.  However this can occur and we have negotiated this in a number of cases in a variety of systems.  A key consideration may be that, despite the poor performance of the Franchisee, the Franchisor may consider that the Franchise site is in a strategic location.  Basically they see value in maintaining the site or brand presence and be prepared to pay something for that. 

A Franchisor in these circumstances will not be generous and will negotiate the least possible payment to the Franchisee.  This will generally be an offer to purchase the plant and equipment at written down value plus stock with any arrears owing to the Franchisor being set off from those amounts. Anything more than that should be considered and accepted by a Franchisee, if they have no other options.

The benefit: The Franchisee is released from ongoing obligations under the Lease and operating costs.  The Franchisee will realise very little in removing the fit out they own as they would have to make good any damage.  This can be used as leverage in some cases when dealing with the Franchisor.

 

Dispute resolution / mediation

A Franchisee should contact the Franchisor representatives directly, discuss the issues and attempt to find practical and compromised outcomes.

Ensure any discussions are confirmed in writing so there is a recorded history of attempts made to resolve the issue.

             

Franchisors representatives are well trained not to put things in writing. 

If a Franchisee is unable to resolve matters from direct discussion with the Franchisors Area or State Manager, the issue should be taken to a higher level and if possible to one of the Directors of the Franchisor company.

It is often the case that once a Franchisor Director is aware of a legitimate complaint that has not been dealt with appropriately at a lower level the matter can be resolved. 

In circumstances where there is a more substantive issue this may be more difficult and it may be necessary, if there is no adequate response to activate the dispute resolution provisions under the Code and seek a mediation. 

 

The Mediation

 

The benefits of mediation to a Franchisee are;

• The Franchisor is required to attend and in good faith, seek to resolve the dispute under the Code.

• An independent mediator, objective of the parties is engaged (usually an experienced Barrister) who can identify the legal issues and assist the parties to find solutions;

• The mediation process itself means that you can focus the attention of the Franchisor solely on your issues on that day.

• All matters at mediation are discussed in confidence and can not be used in later proceedings and therefore the parties can speak openly and consider practical outcomes.

• Irrespective of a successful outcome at the mediation the Franchisee will better understand the Franchisors position and hopefully vice versa.

• The resolution is in the hands of the parties, not a third party (i.e. a Judge).

 

Other considerations – ACCC

• Once the dispute resolution process is activated, it does not prevent a Franchisor from terminating a Franchisee however, it is arguable that a Franchisor should not terminate a Franchisee, where there is a legitimate dispute as this may be considered unconscionable conduct.

• The mediation process can simply buy the Franchisee time to think and plan.

• Consider a written complaint to the ACCC.  If the issues affecting the Franchisee relate to a number of Franchisees in the system the ACCC may be interested in stopping the unlawful behaviour of the Franchisor continuing.  This can also be a useful leverage option when the ACCC has, in fact, taken action against a Franchisor, where orders have been obtained against a Franchisor in the Federal Court, or undertakings have been given by the Franchisor to the ACCC or to Court.

 

The walk out

This certainly crystallises a loss, exposing a Franchisee to a claim for breach of the Franchise Agreement.  The consequences are that the Franchisee may be exposed to a claim for loss and damage.  The Franchisee will also be subject to a restraint of trade, and will not be able to operate a similar business in competition to the Franchise business in their site or within the period and radius of the location.  This option, often the last resort should be carefully considered.

It also exposes the franchisee and their personal assets where they have given guarantees to the landlord and under the Franchise Agreement.

 

So why can’t I sue the Franchisor – will the court law see it my way, and fairness and justice prevail?

Clearly there are a number of considerations;

• Is it feasible to sue the Franchisor whilst a Franchisee is still in the system? Unlikely, although it may be necessary to bring injunctive action to stop a Franchisor terminating unlawfully.

• Even where a Franchisee has exited the system there are some threshold issues to consider before suing the Franchisor. 

 

Do you have a “cause of action”?

 

Even if there is a:

• Breach of the contract by the Franchisor.

• Breach of the Franchising Code of Conduct.

• Breach of the Trade Practises Act provisions (now called the Competition and Consumer Act 2010), for example –misleading and deceptive conduct, unconscionable conduct, third line forcing, resale price maintenance issues. 

 

Is there objectively sufficient evidence to substantiate a claim that meets the necessary legal proofs?  The burden of satisfying a Court is on the party who instigates the claim!

Often the representations that were relied upon by the franchisee were verbal and not in writing.  In that case how do you prove those ** they may have been some years earlier and no doubt will be denied by the franchisor or that person may have left the franchisor.  These are all practical, but very real problems in substantiating a franchisees claim.

 

• Even though you may have the strongest and clearest case in the world, do you have the financial means to be able to bring the proceedings.  It may take many years to resolve. The Franchisor will defend the claim and will have deeper pockets.  Is it worth spending $50,000.00 to $120,000.00 on a legal case where the return is at best, uncertain.  As you would for a business investment it is necessary to conduct a cost benefit analysis factoring in a component of risk and from that, make an unemotional decision.  After all, it is about money, loss and risk. 

• There are cases where litigation is the only options or used as the means to bring about a settlement.  Each case however has to be carefully analysed based on legal and not emotional considerations.

 

Risks of litigation

 

The one certain thing about litigation is that nothing is certain!

The mediation process can usually lead to a more successful outcome because the parties themselves are in control of the outcome.

In Court, matters are generally beyond the control of the parties and even your legal team.  The parties are in the hands of a Judge who may or may not see things the way you have.

Ask any lawyer and they will all tell you the experience of inexplicably losing the “best case” or winning the “worst case”.  Why? Human judgment and subjective assessment.

A Judge may not see things the way you do.  Sharp commercial conduct by a Franchisor is not necessarily unlawful or unconscionable conduct.  Understanding the franchise relationship and the rights and obligations is crucial.  There have been a number of recent cases where franchisees have brought claims and lost.  The legal threshold to succeed in these cases is high and requires supporting documentary evidence and often supporting forensic reports which can be extremely costly. 

Are legal proceedings a good investment? Absolutely not!

Consider that you have $50,000.00 to put towards a legal action, having walked away from the Franchise carrying a debt of $350,000.00 secured over your home. 

Do you put that $50,000.00 towards suing the Franchisor “in the hope” that you may, after a lengthy legal battle recoup some part of your $350,000.00 in circumstances where:

• The outcome will be uncertain.

• Based on a subjective assessment of a third party (a judge). 

• If you do succeed, to what extent, once legal costs eat into any return as you may only recover a portion (60%) of your actual costs?

• The Franchisor may make an offer (but they may not!).

• Balance that against investing the $50,000.00 for your future needs, or in a new business opportunity which may give a more certain outcome. 

 

Better to talk - communicate – negotiate

Some of the keys to a successful negotiated outcome with Franchisors from our experience have been;

 

• Open the lines of communication with the Franchisor at the right level;

• Don’t threaten the Franchisor with legal action or going to A Current Affair;

• Arrange to meet and discuss sensible and realistic options.  Don’t aim unrealistically too high!;

• Apply strategic pressure where and when required – pick when to use any leverage that you may have.

• Avoid the “gung ho” litigation lawyer keen to commit you to a long and costly court battle.

• Seek objective strategic advice from an experienced Franchise lawyer who can assist you to explore the right strategy for you.

 

Click here to contact Wisewould Mahony Specialist Franchise Lawyers

 

 

  Introducing Mark Fernandez

Mark brings over 20 years of senior management experience in franchising and business development to our team and to your business. This valuable experience ranges across many business models including multi international companies and local Western Australian systems.

Mark has been influential across a number of key industry sectors, including Retail, Shipping and Hospitality.

As a business executive Mark specialises in delivering solution based outcomes for business growth and productivity. He is a natural problem solver and takes a keen interest in teaching clients how to focus on solutions rather than getting caught up in the many day to day challenges that they face.

His legacy is the development of a culture of service excellence with all stake holders and is passionate about staying abreast with current and new business initiatives.

Mark is currently completing his MBA at Curtin University; a true reflection of his passionate belief that all business owners and executives must continue to grow and learn as individuals, if they are to provide to their roles and/or their businesses the necessary skill sets required to take them to maturity with optimum outcomes.

Mark is a committee member of the West Australian Chapter of the Franchise Council of Australia.

Mark is a family man with young children. This of course keeps him grounded and in touch with reality.

In summary Mark brings many valuable lessons and skills sets to the table all of which are available to assist you to grow and improve your business. His contribution will be very valuable to you.

Click here for more information about Business Development Alliance

 

 

How do I know that the franchise system I am buying into is viable in the medium to long term?

 

So your about to be a franchisee? Well let’s hope that you have evaluated the franchise system and satisfied all the key areas that will keep you dancing in the system you have chosen. This decision will have a large impact on the lives of you and all members of your family.

Whether it is a mobile domestic service such as Lawn Mowing, Car Detailing, or a retail based business in a suburban or regional shopping centre, you should conduct a detailed and thorough evaluation of that franchise to ensure that it is the best opportunity for you and your family.

Some key areas of your review should cover:

• The Concept – is it proven?

• Consider the Franchisor’s Management Team

• The content of the Operations Manual should cover all the ‘day to day’ activities of running the business

• The Market – the organisations market share and competitor analysis

• The Future – what are the expansion and business plans?

• Franchise Agreement and Disclosure Documents – get expert advice from franchise advisors.

You may feel like you are dancing with wolves at times, but knowing the right questions to ask will keep you from tripping on your two left feet!!!! 

Ask these further questions of the Franchisor:

• How experienced is the Franchisor?  What's the track record of the franchise? What has the growth rate been for the past three years?

• Is the Franchisor financially sound?  Can you check from the Disclosure Document?  Can your accountant talk to theirs’?

• What are the growth and development plans for the next five years?

• Is any deposit that you pay to the Franchisor refundable?

• Does the Franchisor have enough experience within the organisation to provide worthwhile ongoing support?               

• Is there sufficient advertising?  Does the Franchisor contribute?

• Is training provided - initially and later?  Who pays?  How good is the training?

• Is there a uniform performance monitoring system?  What are the arrangements for providing field support?

• How many outlets are there?  How many are company-owned?

• How many failures have there been?  Details?

• Can I contact existing Franchisees of my own choice? 

• Are they a member of the FCA – Franchise Council of Australia

Hopefully, the franchise that you have chosen passes your evaluation process and the lessons learnt along the way will help you choose the right dance instructor that will take you to the Nationals. The key is to find out if the instructor you have chosen can actually dance the Waltz, Quickstep and when required the Rumba as there will inevitably be different tunes playing over the next 5 – 10 years that will require different expertise. It’s no good if all they know is the Macarena!!!

             

For more information on selecting the right franchise for you, please Click here to contact Mark Fernandez, Director of Business Development Alliance

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What it takes to run a successful franchise business

A smooth running franchise business takes all the same preparation as it does to win gold in the 100m final. You need to plan ahead, train every-day and become mentally tough.

It’s never too early to prepare for the future.  You should always have a current business plan and exit plan. As the old saying goes: ‘If you fail to plan, you plan to fail’.

Excellent franchisees know the game and are aware of the full support offerings available from the Franchisor. They also know that by using the systems and processes that are available to them, they control their own destiny and direction of the franchise business.

The search for excellence does not stop there!!! You need to be continually challenging yourself by asking these types of questions:

Do I ask for advice?  Never be too scared to ask for advice.

Is my Business Plan and Exit Plan (Strategy) current?

How effective is my LAMP (Local Area Marketing Plan)?

Do I follow the systems and procedures that were outlined during my initial training?

Do I reinvest in training my people?

Do I need more training in sales or operations?

Do I understand what effects my daily cash-flow position?

How does my KPI’s compare to the group?

What stats do I need to keep and how can they assist me monitoring my business?

Do I know the financial position on a weekly basis?

In addition to running a successful business, successful franchisees also exhibit the following traits:

Like being on committees and FAC’s (Franchise Advisory Councils)

Attend FCA functions

Are positive contributors to the network

Team players and not individuals

Regularly attend franchise meetings and training sessions

Not afraid to ‘test’ new equipment or procedures

Make themselves available to new and existing franchisees

Continually reinvest in people, equipment and systems

Generally embrace change and not resist it.

Make benchmarking visits to other franchisee stores/ territories to see what’s new

Have a good grasp of the terms in their Franchise Agreement- renewal, sale, what constitutes a breach, etc

Exceed any ‘minimum performance criteria’ that the Franchisor may set

Now that you have completed the training and have made it through the heats and into the final, everything comes down to how well you have prepared. With the starters pistol sounding it is imperative that you are first off the mark and that you have a sound game plan, which if you stick to, should bring Gold, Gold and more Gold!!!! 

For more information on winning Gold through 'best practice' operations, please Click here to contact Mark Fernandez, Director of Business Development Alliance

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Buying a Franchise? 

In today’s busy world of small business, and franchising, it is vitally important to minimise the risks involved, in what is potentially the largest investment of time and money that you will make of a life time.

Risk and reward can often go hand in hand; this of course means that the greater the risk then the greater the reward.

In simple terms, risk in business is ever present, so it is even more important to fully understand the extent of that risk and balance it against its potential rewards

By adopting the R.I.S.K. management plan promoted by specialist franchise advisors, BDA, it is relatively easy to achieve a degree of comfort about those risks and why they are present.

In four easy steps, it is possible to systematically approach this exercise, and those steps are:-

              R            - Research Franchising

              I             - Investigation

              S            - System

              K            - Knowledge

RESEARCH – you can never do enough research!! The key here is research, research and more research!!! The starting point should be to discuss your intentions with franchising experts as not everyone is suited to franchising. From there, you should read as much about the franchising sector through franchising magazines, the internet and attending franchising exhibitions. The Franchise Council of Australia (FCA) website is a good starting point www.fca.com.au this will give you a strong understanding of the sector that employs over 630,000 Australians and contributes approximately $130b to the Australian economy.

Your next step is to identify a few opportunities that appeal to you – I suggest that you limit your selection to a maximum of two different sectors and no more than six or eight different opportunities, any more that this will only confuse you in your decision making. It is imperative to INVESTIGATE those opportunities in some detail.  Comprehensive information can be obtained from Franchisors, their websites and even visiting the franchises.  The more information you can obtain will naturally assist you make a more informed judgement into the type of business that is suitable for you.

By looking closely at the SYSTEM that drives a particular franchise business, will enable you to ascertain the level of professionalism that they have to offer. It is important to ask the hard questions on training, franchisee support and the level of detail in the operations manual – after all this document should contain all the required information to operate and drive your business’s profitably. Considerations must also be given to businesses that are more suited to your skill sets and personality.

Finally, it is important to gather as much KNOWLEDGE of your final selection before entering the industry and this is easily achieved by speaking with people already in the industry and /or even in the franchise network that you have chosen.

The old adage still applies that ‘if you fail to plan then you plan to fail’

Mark Fernandez

Director

Business Development Alliance

Click here for more information about Business Development Alliance

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How to Approach a Bank Manager for a Loan

 

For most of us a trip to see the bank manager is like having a tooth pulled, a necessary evil. It doesn’t matter if you’re looking for finance from $50k or $5m the same feelings apply- a loss of control and failure if you are not successful in your application. However, the sheer elation of having your application approved gives you the same rush as skydiving from 10,000ft!!!

The emotional rollercoaster can be very draining and may even cause you to think twice about whether or not you really do need the funds; or can you reduce costs or even wait another six months. Does it really need to be this way??? The real question is how much time are you willing to invest to increase your chances of being successful with your application?

Here are my key strategies for tilting the scales more in your favour!!!

Strategy #1 – Preparation, Preparation, Preparation

 

The key here is to wear the bank managers’ shoes and review your application as if someone else were to present it to you. Keep in mind that most applicants are full of enthusiasm, excited about their new venture or expansion plans and usually pretty optimistic that they will be given the ‘green light’. Now the bank manager is typically somewhat restrained with their emotions (please don’t take any offence my friends in the financial services!!) and are not quite jumping out of their skin when they have poorly prepared plan in front of them or if you are not able to answer their questions. You must do your homework and be confident.

Strategy #2 – A Well Constructed Business Plan

It’s a well-known fact that your bank manager really does want to lend you the money and it is really rewarding for all if that happens. Many business entrepreneurs think that they must engage the services of a trusted CA or CPA, and spend more money on an elaborate business plan than they spent on their wife’s engagement ring. All this to impress the bank manager. Well the truth here is that you certainly do need a trusted business advisor on your side and the bank manager will be impressed by the fact that you recognised the need for expert advice in the planning stage. How to select a trusted business advisor is whole other subject.

With the information made available to prospective franchisees through the web, directly from the franchisor and through the Disclosure Document, you should be able to gain information on the key operational matters of which to construct your business plan. Some components are:

• Type of business

• History of the business

• Background of directors

• Objectives and direction of the business

• Operations and location

• Market segment

• Market analysis and marketing plan

• Capital requirements and ROI

• Full description of the products and service offerings

• Cash flow – projections

• Financial analysis

• Customer demographics

•  Management Structure – key personnel 

Your business plan should also take into account your strengths and weaknesses and how you plan to fill the ‘gap’ in your weaknesses. It may be a case of stating for the record that you intend to hire a manager with different skill sets to balance the operations. 

Cash flow is king and you need to be able to demonstrate that you have a reasonable understanding of the projected cash flow and how much working capital is required to maintain the day to day operations.

Finally, your business advisor needs to probe and ask the tough questions about your business plan; ‘like what happens if sales drop by 20%?” and review every aspect of your document, if you do this then your dealings with the bank manager will seem like a walk in the park.

Good luck and remember the key is to pack and re pack that parachute, after all you only get one chance to make sure everything is ready before you step out of the plane!!!!

For more information on preparing business plans please Click here to contact Mark Fernandez, Director of Business Development Alliance

 

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INFORMATION FROM TROY HAZARD

We are proud to also bring you some tips from Troy Hazard.

Troy has been working with franchise groups since the late 80's in over 16 different countries around the world. Below you will find articles on:

How to go about buying a franchise - The Checklist
Help - I need somebody!
The Disclosure Document
Guarantees
Can't Beat Communication
Culture
Franchisee Leprosy
Meaningful marketing
The Common Bond – The Customer
One stop shop
So you want to be a Franchisor
Franchising - How to choose the right franchise for you

 

There is an ongoing quandary in franchising how can we make something so standard and yet cater for individuals’ needs.

How can we all look the same, be the same, sell the same, and do the same, when our customers and areas are so different?

For years I’ve heard these words bleated by both franchisors and franchisees alike ...

‘But you don’t understand, it’s different for me, my customers are different, they are richer, poorer, slower, faster, dumber, smarter, they don’t like the things you are making me sell.’

‘I can’t run that promotion, it won’t work in my area, you just don’t get it I need something that suits ME!’

This is a killer perception in franchising and the cause of a lot of disruption in the relationship between franchisor and franchisees.

We’ll I’m here to tell you, as a franchisee, it’s not different for you!

We’ve worked in countries across the globe, different cultures, different languages, and different lifestyles, in Australia alone we have files on over 300 territories, cities and suburbs.

We’ve sold pizzas, cars, tyres, homes, ice cream, donuts, health care, gifts, pool care, and a range of weird and unusual services that have been franchised around the planet.

And there is one common bond between all of these businesses that make them ALL the same - their customers!

You see consumers are all looking for the same thing in a transaction.

They want service. And in business today good service is a given.

Customers want a quality product – something to rely on. 

Customers want a business relationship. By having strong relationship your customer feels more confident about their choice. 

It needs to be easy. It is too hard they will simply go elsewhere.

And they want value.  Importantly value does not always equally cheap or for that matter relative to money at all.

The interesting thing to note here is that if service, quality, relationship and ease are present in the transaction, then your customers will be given the ‘perception’ of value automatically. 

And THAT’s what gives them a common bond.

And that’s what makes it NOT different for you in your area.

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One stop shop.

If you're having trouble deciding which way to go with your potential
franchisee opportunity then drop into the Franchisee Expos in your area.

These events happen throughout the year in capital cities around the country
and they are a great opportunity for you to see a fantastic number of
different franchise systems under the one roof. For a modest entry fee you
can talk to franchisors, and franchisee, gather information on systems and
their offers, and attend some of the many workshops they have over the few
days.

You'll also find the Franchise Council of Australia stand where you can
purchase books and information on the category and talk to people who can
answer questions on a range of topics.

Keep your eye out on the Inside Franchising website for more information
when a show will be on in your area, and go for a wander!

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So you want to be a franchisor……

As consultants, we get so many people come through our front door with a ‘great idea’ they want to franchise. In some cases they really only have an idea, and no idea on how to turn that into a franchise. In other cases they do have a great little business that lends itself to franchising.

I’m going to give you the 2 minute microwave version of the questions we would usually ask over 2 days … just to get you thinking!

The first question we ask is: Have they run a pilot of the business they are about to franchise?  Franchising is about delivering a proven system and business model. It’s much harder, and dangerous, to franchise something that has not been done … duplicating something that is already a success elsewhere is much easier to sell.

In short, as a potential franchisee looking to buy into your vision, I want history, and I want proof of concept.

From there we can move to what we call an operational audit. Where we establish what documentation the potential franchisor currently has in place:

• Operations Manuals
• Sales and Customer Service Manual
• Marketing Manual
• Training materials

Is there a business plan to support these manuals and systems, and can you transition that from a single outlet model to a multiple outlet franchise style business model?

Then there are the business strategy questions because as soon as you become a franchisor, you stop selling widgets, and start selling stores.

So, in line with that: what staff do you currently have in place to run your existing business, and what staff do you need to support your franchise system?

There are feasibility studies to be conducted, territories to be mapped.

And then there are the hard questions ... yes, they do get harder.

What will be the franchise offer? What services are you going to provide? How often you will provide them and how will you charge for that?

After all you are doing this to make a quid!

And last but certainly not least … Do you have adequate capital to fund the initial stages of franchising? There is a considerable cost to the legal documents, accounting costs and the development of operational documents and systems.

It’s a big thing, the challenges are not insurmountable, but there is a lot to think about when you start on your journey to become a franchisor.

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How to go about buying a franchise - The Checklist

Let's assume you have done some homework on a few systems and created your short list of potential franchise opportunities.

So let's assume you have done some homework on a few systems and created your short list of potential franchise opportunities.

What happens now?

Take your list and apply these simple questions to each of the opportunities you've selected, don't fudge it, this is a big investment and you can't let the romance of buying a business get in the way of good business sense.

1/ Do you REALLY see yourself working in the business all day every day for the next 5 years.

2/ Do you feel a connection with the franchisor? Franchising is a marriage, and as such you need to know you can move forward together and live happily ever after, because divorce in franchising is just as hard as the real deal.

3/ Will the business provide you the lifestyle you anticipate? If so then HOW is the business going to provide you with that lifestyle?

4/ Have you talked to other franchisees in the system, these guys are in there doing the do already, how do THEY feel about the business.

5/ Can you see the potential for growth , and I mean growth on a number of levels, growth as a person, growth as a businesses and growth as a franchise system.

6/ Have you read and do you understand the disclosure document provided by the franchisor. This is you road map to the history of the system and an important document.

7/ Have you done a financial forecast on the business? How long it will take you to make money, remember the start up phase in a business ALWAYS takes twice as long and costs twice as much, so you'll need the cash for a rainy day with an expectation of rain from day one.

8/ Are you clear on roles and responsibilities? Do you understand what is expected from you as a franchisee and are you clear on the services the franchisor is going to provide.

9/ Have you had professional advice from your lawyer and your accountant.

When you've applied the questions to all of your potential opportunities you'll start to see the clear winners, and you'll be in a position to conduct a more focused interview with your potential franchisor and make a more qualified decision.

In the meantime, be sure to take the Franchise Suitability Test   to assist you to to find out whether you're suited to franchising.

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Franchising - How to choose the right franchise for you

Franchising has changed a lot in recent years, and as a potential franchisee trying to enter the market it's sometimes really difficult to find your way through the clutter of opportunities.

The first thing you've got to do is visualise yourself in the business. You have to really believe you can be that person in that franchise - by way of example: you might like to drink coffee, but do you want to stand on your feet all day and make it.

Franchising is a really unusual bond between franchisor, franchisee, the store and the customer, so to create that bond you need to start with a short list. The places to look for that short list are the Inside Franchising website, the Annual Franchise Directory or the Saturday paper.

And don't think you need to make your entire list from the same category. You might like to look for an outdoors franchise, a services franchise or a retail franchise - look for things you like to do.

Once you've got your list then we're going to work out how to analyse it and we will be looking at that in the coming weeks.

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WHERE TO NEXT?

For information and advice on the best franchise or business for you; franchise and business opportunities; and general advice when buying a business, a franchise or starting your own franchise, be sure to visit our expert pages:

Need Advice?

Click here to find a Franchise Expert.

 

Latest News?

Click here - for the latest edition of the Inside Franchising Newsletter which is packed with global news and information on franchising, finance and business.

Franchises for Sale and Opportunities?

Franchises for Sale - with hundreds of franchise and business opportunities available for sale today - this is a must-see if you are thinking about buying a franchise.

 

Q&A ?

Frequently Asked Questions – Read some frequently asked questions about franchising whether you are looking to buy a franchise or if you want to start your own franchise, this page is essential reading.

Suitability?

And, if you have ever wondered whether you are suited to run a franchise business be sure to take our simple Franchise Suitability Test

 

Plus

Australian Competition and Consumer Commission

For links to the latest ACCC publications which are a must-read if you are considering a franchise business of any kind.

 

Stay a while and take a look around – there is a lot to see and do!

 

Be sure to register to receive the Inside Franchising Newsletter to be kept up to date with the latest developments in franchising.